The Virginia Retirement System will be undergoing major changes. Despite some objections to requiring local employees to contribute five-percent toward their retirement, lawmakers this week supported amendments by Governor McDonnell to fine-tune the plan. The reforms will replenish funds borrowed from the VRS and hold the state more accountable.
Both the House and Senate passed the amendments overwhelmingly. Senator John Watkins says one big change allows local governments to phase in contributions made by their employees one year at a time—up to five years with an offsetting raise:
“We had already included that provision in that same bill for teachers but had not included it for local government employees,” said Watkins.
The new hybrid plan to combine defined benefits and defined contributions for new hires will take effect in 2014. It had mostly technical amendments. “The primary ones dealt with local governments and the availability of the disability plans and if the employees went on the hybrid plan, and even if the local government had their own disability plans that they would be commensurate in terms of the benefits with state plans,” said Watkins.
Another change prevents those who already have an optional retirement plan from joining the hybrid system. Watkins says the law now requires the state to make contributions at VRS Board-recommended rates, which should have been done all along.